Global industry just had its strongest quarter in 6 years

There are plenty of encouraging signs for the global economy in 2017, and here’s another one.

According to analysts at Macquarie Research, global industrial production just enjoyed its strongest quarter of growth in nearly six years.

Industrial production (IP), measuring output of mining, utilities and manufacturing firms, rose by a further 0.3% in June, leaving the increase over the quarter at 1.2%, the strongest performance since the September quarter of 2011.

It’s little wonder why industrial metals have enjoyed a strong showing over the past few months.

This chart from Macquarie shows not only the recent bounce in IP, but also the strong acceleration since the start of 2016, adding to evidence that the global economy is strengthening.

Source: Macquarie Research

Adding to the strong result, Macquarie said that the improvement was broad-based in nature.

“In Q2, the 1.2% global increase was as usual dominated by China, whose industrial production rose 1.9%, supplying 0.45% points of the increase. But the EU, USA and Japan also contributed a fair chunk,” it said.

Source: Macquarie Research

While Macquarie is forecasting a modest slowdown in the second half of 2017, it says the strong June quarter result will likely see IP grow at the fastest pace since 2014 this year.

“(While we see) the global manufacturing cycle continuing to turn over, the slowdown will be less severe and take longer than we had forecast,” it says. “We thus raise our full-year IP estimate to 3.2%, from 2.7%, making it the best year since 2014.”

Looking beyond this year, it expects growth in IP to slow further in 2018.

“(This is) simply on the expectation that Chinese growth moderates towards 5%, but we reiterate this is more of a normalisation of growth than any major pullback,” it says.